Question

Payment to creditors in full settlement means?

Answer 1

Answer:

Payment to creditors in full settelment means the amount payable to the creditors is now paid.

for example,

let mr. x is our creditor and we have to pay ₹6,500 to mr. x. but we paid ₹6,000 and no more amount is to be paid in future(full settelment) so in this case ₹500 is the discount allowed to us by mr. x (creditor)

Journal entry

creditors a/c dr.

to cash or bank a/c

to discount recieved a/c

according to the example given journal entry will be

mr. x's a/c dr. 6500

to cash a/c. 6000

to discount received a/c 500

i hope it will help you.